I spoke with a Carlsbad and Point Loma homeowners this week and they wanted to know if they would be responsible for deficiency judgments and or potential tax liability.
Of course the tax deficiency question revolves around the issues of whether a loan is a recourse or non recourse loan. Since we have already covered those questions recently in this blog we will move to the next question.
Will there bill tax liability if the loan is forgiven. While I knew the answers, I did not have legal support for my opinion. If a lawyer does not have the law, the case, or the code, he or she will not feel comfortable giving his opinion. (this is why lawyers have a tendency to qualify their responses). So, after spending some time reading IRS publications I now have the support I need to give my opinion.
Since this topic of tax liability and loan forgiveness can be somewhat complicated, I am willing to answer a few questions here on this blog. Please submit your questions as comments.